Analysts at Baird kept their Outperform rating on US chipmaker Micron Technology Inc (NASDAQ:MU) despite expecting NAND memory chip prices to decline nearly 10% sequentially in the third quarter.
Micron is the fourth-largest US-based chipmaker behind Qualcomm Inc (NASDAQ:QCOM), Broadcom Inc (NASDAQ:AVGO) and Intel Corp (NASDAQ:INTC). Unlike its larger peers, however, the company has doubled down on the market for memory chips.
Micron, which is based in Boise, Idaho, is the second-largest supplier of memory chips globally, offering chips that include DRAM, NAND flash and NOR flash.
Micron’s memory chips are used to store information, in comparison to micro-processor chips made by companies like Intel, which provide computing power.
“TLC 128Gb NAND contract pricing declined 4% month-over-month for August while MLC NAND pricing declined 3%,” Baird analysts Tristan Gerra and Maggie Sims wrote in a flash report released Friday.
“We expect NAND pricing will decline 10%+ sequentially in the 3Q,” they added.
READ: Analysts delve into the details about Micron Technology on release of its 10Q
Sales to Intel under the umbrella of the Intel/Micron Flash Technology joint venture fell to US$114mln in the fiscal third quarter of this year and US$341mln in the fiscal year to date compared with US$123mln in the fiscal quarter of last year and US$375mln for the first nine months of the last fiscal year.
One reason for the slowdown is that the Intel/Micron Flash Technology joint venture discontinued its production of NAND chips in the first fiscal quarter to focus on 3D XPoint memory production. Micron still expects to develop third-generation 3D NAND chips with Intel, starting next year.
Baird kept its Outperform rating on Micron and US$100 price target based on what it described in a previous note as "continued strong demand/ content increase trends and healthy supply, demand dynamics, a meaningful improvement in Micron’s fundamentals, and valuation.”
Shares of Micron were down 2.44% to US$51.24 by midsession on Tuesday.
Read: Micron Technology sales increase 40% in its third quarter and reaffirm analysts’ confidence
Meanwhile, Micron announced last Wednesday that it planned to spend US$3bn to expand production at its plant in Northern Virginia as part of a broader growth spurt at the company. Micron brought in US$7.35bn in the most recent quarter.
That growth has been fueled by the new data economy, in which established industries are embracing information-age technologies. Micron's memory chips are now used in cars, drones, cameras, smartphones and data-centers which need to support new cloud-based technologies.
Contact Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive